2nd Annual
Demographia
International Housing
Affordability Survey:
2006
Ratings for All Major Urban Markets
Australia Canada Republic of Ireland
New Zealand United Kingdom United States(Data for 3rd Quarter 2005)… one of the best instincts in us is that which induces us to have one little
piece of earth with a house and a garden which is ours; to which we canwithdraw, in which we can be among our friends, into which no stranger
may come against our will
(Sir) Robert Menzies, 1942
(Australia’s Longest Serving Prime Minister)

2nd Annual Demographia
International Housing Affordability Survey:
2006(Data for 3rd Quarter 2005)
SUMMARY TABLES
20 Most Unaffordable Housing Markets
MedianRank Housing Market
Multiple
Rank Housing Market
1
US
Los Angeles
11.2
11
UK
London2
US
San Diego
10.8
12
UK
Bristol
3
US
Honolulu
10.6
12US
Fresno4USVentura County
9.6
12
US
Sacramento
5
US
San Francisco
9.3
15
NZ
Auckland
6
US
Miami
8.8
15
Australia Hobart
7Australia Sydney
8.5
15
Canada Vancouver
8US
New York
7.9
18
Australia Adelaide
9USRiverside
7.7
19
US
Las Vegas
10 US
San Jose
7.4
19Australia Melbourne

Rank
1
1
3
3
5
5
5
8
8
8
11
11

Housing Market
US
BuffaloUS
RochesterUS
Indianapolis
Canada Winnipeg
US
Akron
US
Omaha
US
Pittsburgh
US
Grand Rapids
US
St. Louis
US
Tulsa
US
DaytonUS
Kansas City

Affordable Housing Markets
MedianMultiple
Rank Housing Market
2.2
11
US
Oklahoma City
2.2
14
US
Atlanta
2.4
14US
Austin
2.4
14
US
Cincinnati
2.5
14
US
Dallas-Fort Worth
2.5
14Canada Edmonton
2.5
14
US
Louisville
2.6
14
Canada Quebec
2.6
21
US
Columbus
2.6
21
US
Houston
2.7
21
US
San Antonio
2.7
24
US
Cleveland

Ratings and Data For All Markets
Schedule 1: Housing Markets by Affordability Rating
Schedule 2: Housing Markets by Nation

Page 20
Page 23

MedianMultiple
6.9
6.8
6.8
6.8
6.6
6.6
6.6
6.5
6.4
6.4

MedianMultiple
2.7
2.8
2.8
2.8
2.8
2.8
2.8
2.8
2.9
2.9
2.9
3.0

2nd Annual Demographia
International Housing Affordability Survey
TABLE OF CONTENTS
The Housing Affordability Crisis .........................................................................................................................1
Executive Summary ..................................................................................................................1
Introduction...............................................................................................................................4
Democratizing Prosperity through Home Ownership .......................................................42005 Housing Affordability Ratings ......................................................................................4
Uncharted Territory: Decoupling House Prices from Incomes........................................7
The “Housing Bubble” ............................................................................................................11
Regulatory Roots of the Housing Affordability Crisis........................................................12
Caution: International House and Lot Size Differences.....................................................16
Housing Affordability: The Policy Imperative .....................................................................18
Schedule #1: Housing Affordability Ratings: All Markets ...............................................................................20
Schedule #2: Housing Affordability by Nation: All Markets .........................................................................23
Methods....................................................................................................................................................................26
Authors .....................................................................................................................................................................28
Figure Sources and Endnotes ...............................................................................................................................29
Tables
1. Demographia Housing Affordability Ratings ..................................................................1
2. 20 Most Unaffordable Markets ..........................................................................................1
3. Affordable Markets ..............................................................................................................2
4. Distribution of Markets by Housing Affordability Ratings ...........................................5
5. Housing Affordability Market Ratings by Nation ...........................................................6
Figures
1. Median Multiple: National Variations ...............................................................................6
2. Median Multiple Trend: Australia ......................................................................................8
3. Median Multiple Trend: Canada.........................................................................................9
4. Median Multiple Trend: Ireland and UK..........................................................................9
5. Median Multiple Trend: New Zealand ..............................................................................10
6. Median Multiple Trend: United States ..............................................................................10
7. Housing Ratings Markets History: USA ...........................................................................11
8. Short Term Interest Rates & House Prices: New Zealand ............................................13
9. Median Multiple by Market.................................................................................................15
10. Average New House Size by Nation ...............................................................................17
11. House Size Adjusted Median Multiple............................................................................18
Permission to quote or copy with attribution granted

THE HOUSING AFFORDABILITY CRISISExecutive SummaryT

his second annual Demographia International Housing Affordability Survey expands coverage to theUnited Kingdom and the Republic of Ireland together with the nations included in the firstedition (Australia, Canada, New Zealand and the United States). The Survey employs the Median1
House Price to Median Household Income Ratio, (“Median Multiple”) to rate housing affordability.
The Demographia International Housing Affordability Survey uses data from September of 2005 for each of
the markets and uses the rating system shown below (Table 1).
Table 1
Demographia Housing Affordability Ratings
RatingSeverely Unaffordable
Seriously Unaffordable
Moderately Unaffordable
Affordable

Median Multiple
5.1 & Over
4.1 to 5.0
3.1 to 4.0
3.0 or Less

Most Unaffordable Markets: The least affordable markets are generally in California, Hawaii, theUS east coast, Australia, the United Kingdom, New Zealand and Vancouver. The most unaffordable
market is Los Angeles & Orange County, with a Median Multiple of 11.2, far above the “severely
unaffordable” threshold of 5.1. The Median Multiple is 8.5 in Sydney, 6.9 in London, 6.6 in
Auckland, 6.6 in Vancouver and 6.0 in Dublin (Table 2).
The most pervasive housing affordability crisis is in Australia, where all markets in metropolitan
areas with more than 1,000,000 have Median Multiples of 6.0 or higher. Affordability is only
marginally better in Ireland, New Zealand and the United Kingdom.
Table 220 Most Unaffordable Housing Markets
MedianRank Housing Market
Multiple
Rank Housing Market
1
US
Los Angeles
11.2
11
UK
London2
US
San Diego
10.8
12
UK
Bristol
3
US
Honolulu
10.6
12US
Fresno4USVentura County
9.6
12
US
Sacramento
5
US
San Francisco
9.3
15
NZ
Auckland
6
US
Miami
8.8
15
Australia Hobart
7Australia Sydney
8.5
15
Canada Vancouver
8US
New York
7.9
18
Australia Adelaide
9USRiverside
7.7
19
US
Las Vegas
10 US
San Jose
7.4
19Australia Melbourne
Source: Schedule 1

Demographia International Housing Affordability Survey: 2006

MedianMultiple
6.9
6.8
6.8
6.8
6.6
6.6
6.6
6.5
6.4
6.4

1

Affordable Markets Remain: At the same time, many markets remain “affordable.” For example,
the markets in the three fastest growing metropolitan areas over 5,000,000 population all haveMedian Multiples below 3.0 and are thus rated “affordable” (Atlanta, Dallas-Fort Worth andHouston). Other affordable markets include three in Canada (Winnipeg, Edmonton and Quebec)
and another 18 in the United States (Table 3).

Rank Housing Market
1
US
Buffalo
1
US
Rochester
3
US
Indianapolis
3
Canada Winnipeg
5
US
Akron
5
US
Omaha
5
US
Pittsburgh
8
USGrand Rapids
8US
St. Louis
8
US
Tulsa
11
US
Dayton11
US
Kansas City
Source: Schedule 1

Table 3
Affordable Housing Markets
MedianMultiple
Rank Housing Market
2.2
11
US
Oklahoma City
2.2
14
US
Atlanta
2.4
14US
Austin
2.4
14
US
Cincinnati
2.5
14
US
Dallas-Fort Worth
2.5
14Canada Edmonton
2.5
14
US
Louisville
2.6
14
Canada Quebec
2.6
21
US
Columbus
2.6
21
US
Houston
2.7
21
US
San Antonio
2.7
24
US
ClevelandMedianMultiple
2.7
2.8
2.8
2.8
2.8
2.8
2.8
2.8
2.9
2.9
2.9
3.0

Unprecedented House Price Increases: In recent decades, the Median Multiple has been below
3.0 in most markets. However, this historic relationship has been broken, as unprecedented house
price escalation has occurred relative to incomes in some markets.
This is a matter for concern. Home ownership has played an important role in democratizing
prosperity in the nations covered in the Survey. Widespread home equity, together with the related
quality of life, neighborhood, community and social cohesion benefits make home ownership a"pillar" of a sustainable affluent economy. These benefits are threatened by the high housing pricesthat are likely to reduce home ownership and household wealth creating capacity. A nation withmore renters is likely to be both less prosperous and less cohesive.
The Recent Past: Nearly All Markets were Affordable: Moreover, in nearly all markets, theMedian Multiple has been near or below 3.0 at some point in the recent past. The long-standing
relationship between house prices and incomes has been upset, however, in the markets that haveexperienced inordinate house price increases.
The run-up in housing prices has caused business writers to evaluate the market as they might astock or shares market. Markets in which there is excessive escalation are characterized as strong,while markets where house prices remain in their historical relationship with incomes are referred toas weak. However, this characterization is inappropriate. Housing prices that escalate to the pointthat millions of households are denied home ownership is anything but good news for the future ofan economy.

Demographia International Housing Affordability Survey: 2006

2

Price Run-Up not the Result of Macroeconomic Factors: Macroeconomic factors, especially
low interests rates, have been often cited as the reason for the extraordinary housing price increases.
However, if macroeconomics were a major factor, then similar price escalation would have occurredin all markets. However, they have not. There are both significant Median Multiple variations among
the markets. Virtually all of the differences are of recent vintage. For example, from 2000 to 2005,
fast growing Atlanta experienced a 0.6 point increase in the Median Multiple, while slower growing
San Diego experienced a 6.6 point increase.
Regional Variations Explained by Regional Land Use Regulation Differences: These regionalvariations can only be explained by regional factors. A growing body of university and international
research indicates that the proximate cause of the extraordinary house price escalation in theunaffordable markets is government policies that create land scarcity. These policies, which range
from so-called “smart growth” policies that prohibit housing on large swaths of land to government
land hoarding, are found throughout the markets rated as “severely unaffordable.” At the same time,
much lighter land regulation is typical of the “affordable” markets.
Smaller House and Lot Sizes in Ireland and the United Kingdom: Ireland and the United
Kingdom are building houses far smaller than in the other four nations. Moreover, the UK and
Ireland are crowding three or more houses on the same land that would be used for a single housein Australia and six or more compared to the United States. The Median Multiple, as presented, is
not adjusted for differences in house or lot (block or section) size.
A Case of Negative Externalities: The unprecedented housing affordability crisis appears
attributable to the negative effects (negative externalities) of land regulation, rather than natural
market forces. The main cause seems to be excessive land use regulation that strangles housing
markets and drives prices upward at rates far higher than can be attributed to conventional
economic trends.
The Prospect: Diminished Economic Growth: Simply stated, scarcity raises prices, including theprice of land and houses. The loss of affordability is so immense that policies such as affordability
quotas, first home buyer grants, workforce housing or tax relief programs cannot possibly make amaterial difference, despite their rhetorical attractiveness in some circles. Instead, governments
should seek to emulate the conditions that have made housing affordability sustainable in so manymarkets and in most markets historically.
The rewards could be substantial. Already, economic research is showing that metropolitan areas
with stronger land use regulation pay a price in diminished economic growth.

Demographia International Housing Affordability Survey: 20063

IntroductionT

his is the second annual Demographia International Housing Affordability Survey. This year, housing
market areas2 in the United Kingdom and the Republic of Ireland are also covered, along with
Australia, Canada, New Zealand and the United States, which were included in the first edition. The
expanded edition includes 100 housing markets. The Demographia International Housing Affordability
Survey is unique in providing standardized comparisons of housing affordability between
international housing markets.
The Demographia International Housing Affordability Survey employs the “Median House Price to MedianHousehold Income Multiple,” (or “Median Multiple” for short) to rate housing affordability. The
Median Multiple is a technically sound and easily understood indicator of housing affordability. It is
to be contrasted with more elaborate affordability indexes. The elaborate indicators, which often
include mortgage interest rates and other factors, are indispensable to the financial sector, but are
not well understood outside of that industry The Median Multiple facilitates meaningful housing
affordability comparisons, both between national and international markets and over time.
In recent decades, the Median Multiple has been remarkably similar among the nations surveyed,with median house prices being generally 3.0 or less times median household incomes, where there
is a balance of demand and supply. This historic affordability relationship continues in many housing
markets of the United States and Canada. However, the Median Multiple has escalated sharply inAustralia, Ireland, New Zealand and the United Kingdom and in some markets of Canada and theUnited States.
Democratizing Prosperity through Home OwnershipHome ownership has played an important role in democratizing prosperity throughout what has
become the high-income world since World War II. In some nations home equity accounts
for nearly one-half of household wealth. Thus, in addition to its quality of life, neighborhood,community and social cohesion benefits, home ownership represents an important "pillar" of asustainable affluent economy.
2005 Housing Affordability RatingsThe Demographia International Housing Affordability Survey uses existing house sales data from
September of 2005 for each of the markets. Forty-two (42) markets are rated as “severely
unaffordable” and 11 as “seriously unaffordable.” Twenty-three (23) markets are rated as“moderately unaffordable.” Twenty-four markets (24) are rated as “affordable” (Table 4).
The ratings for all housing markets are shown, by affordability rating category, in Schedule 1,
following this article.3

Demographia International Housing Affordability Survey: 2006

4

Table 4Distribution of Markets by Housing Affordability Ratings
RatingSeverely Unaffordable
Seriously Unaffordable
Moderately Unaffordable
Affordable

Median Multiple
5.1 & Over
4.1 to 5.0
3.1 to 4.0
3.0 or Less

Number ofMarkets
42
11
23
24

20 Most Unaffordable Markets: The ten (10) least affordable markets are in California, Hawaii, theUS east coast and Sydney, Australia. Four California markets have Median Multiples that are morethan three times the maximum 3.0 “affordable” rating.
The second ten (10) least affordable markets include Vancouver, two markets in the United
Kingdom (London and the West of England), two California markets (Sacramento and Fresno),
Auckland, New Zealand, three Australian markets (Hobart, Adelaide and Melbourne) and Las
Vegas.
Affordable Markets: At the same time, many markets remain “affordable,” all in Canada and theUnited States. The “affordable” Canadian markets are Winnipeg, Edmonton and Quebec. The“affordable” US markets are all in the South, the Midwest and the inland East. The most affordable
markets are Buffalo, Rochester, Indianapolis and Winnipeg.
National Summary: There is a substantial variation in the affordability of housing markets (Figure1).4 The most pervasive housing affordability crisis is in Australia, where all markets in metropolitan
areas with more than 1,000,000 have Median Multiples of 6.0 or higher. Affordability is only
marginally better in Ireland, New Zealand and the United Kingdom. There are no “affordable”
markets in these four nations (Table 5). The ratings and data for all housing markets is shown bynation in Schedule 2.
•Australia: Six of the eight housing markets are rated as “severely unaffordable,” including
Sydney. The other two markets are rated as “seriously unaffordable.”5•

Ireland: The one major market, Dublin, is rated as “severely unaffordable.”•

New Zealand: All three major markets are rated as “severely unaffordable.”•

United Kingdom: Eleven (11) of the 12 housing markets are rated as severely unaffordable,
including all three in the London area. No markets are rated “affordable.”

In Canada and the United States, the share of “severely unaffordable” markets is more limited and anumber of markets are “affordable.”

Demographia International Housing Affordability Survey

5•Canada: One market (Vancouver) is rated “severely unaffordable.” Another market,
Toronto, is rated as seriously unaffordable. Three markets are rated as “affordable”(Winnipeg, Edmonton and Quebec). Two other markets, Ottawa and Calgary, are in thelower range of the “moderately unaffordable” category.

•

United States: Twenty (20) of the 67 housing markets are rated “severely unaffordable.”
Eight markets are rated as “seriously unaffordable,” while 18 markets are rated as“moderately unaffordable.” Twenty-one (21) markets are rated as “affordable.” All of theaffordable markets are located in the South, the Midwest and the inland East. Eighteen (18)markets are rated “moderately unaffordable.”Median Multiple: National Variation
2005

12
10

Median House
Price/MedianHouseholdÅ Income

86420Australia

CanadaIreland

New Zealand

UK

USA

Figure 1

Table 5
Housing Affordability Market Ratings by Nation
NationAustralia
CanadaIreland
New ZealandUnited Kingdom
United States

Affordable(3.0 & Under)

Moderately
Unaffordable(3.1-4.0)

Seriously
Unaffordable(4.1-5.0)

Severely
Unaffordable(5.1 & Over)(Average)

0
3
0
0
0
21

0
4
0
0
1
18

2
1
0
0
0
8

6
1
1
3
11
20

6.2
3.8
6.0
5.9
5.9
4.6

Demographia International Housing Affordability Survey: 2006

6

Uncharted Territory: Decoupling House Prices from IncomesIn recent decades, the Median Multiple has been below 3.0 in most markets. However, this historic
relationship has been broken in some markets, as unprecedented house price escalation has
occurred relative to incomes.

A structural shift may be underway that would permanently increase the price of housing relative toincomes and other consumer goods and services. It seems likely that such a shift would lead tolower levels of economic growth at the regional, if not the national level. In the longer term, lesshousing affordability is likely to lead to less home ownership. This is already evident in New
Zealand, where high housing prices are expected to reduce home ownership levels to 63 percent by
2011, down from a peak of 74 percent in 1991.6 More substantial declines in home ownership arelikely in New Zealand and elsewhere if the present housing affordability crisis should persist. Such atrend would be counter to public policy objectives in virtually all of the surveyed nations.7
This would, in turn, reduce household wealth creating capacity and could undermine the community
commitment that is engendered by home ownership and equity. A nation with more renters is likely
to be less prosperous and less cohesive.
The present extent of housing unaffordability is unprecedented, both historically and across markets.
Most housing markets have exhibited Median Multiples of near 3.0 or less in the past and many still
do. For example:•

Australia: All of the largest markets in Australia except Sydney had Median Multiples of 3.0
and below at least during part of the 1980s. The Median Multiple rise has been steep. Since
1996, the median multiple has risen more than a full two points in each of the large capital
city markets and more than three points in Sydney (Figure 2).

•

Canada: As noted above, some markets remain “affordable,” with Median Multiples of 3.0
or below. All markets except Vancouver have been near or below a 3.0 Median Multiple
during the last 10 years (Figure 3)•

Ireland: The Median Multiple was below 3.0 in Dublin in 1996. It has since more thandoubled (Figure 4).

•

New Zealand: In the early 1990s, the Median Multiple was 3.0 in Wellington and has sincerisen more than two points. The national median multiple was somewhat above that of
Wellington in 1991 and has since increased nearly 2.5 points (Figure 5).

•

United Kingdom: The Median Multiple was 3.3 in London (Greater London Authority) in
1996. By 2005, it had more than doubled to 6.9 (Figure 4).

•

United States: As in Canada, a significant share of US markets remains affordable, withMedian Multiples of 3.0 or below. In 1995, no US markets were rated “severely

Demographia International Housing Affordability Survey: 2006

7

unaffordable.” The least affordable market was Honolulu, with a Median Multiple of 4.3. In
the last decade, 20 markets have become “severely unaffordable.” The average MedianMultiple among these markets rose 4.3 points from 1995 to 2005, 14 times the 0.3 point
Median Multiple increase in markets rated affordable (Figure 6).8 In the last decade thenumber of affordable markets dropped from 56 to 20, while the number of markets rated
seriously unaffordable or severely unaffordable rose from one (1) to 27. In 1995, nearly 90
percent of markets were affordable, a figure that dropped to less than one-third by 2005
(Figure 7).9
One consequence of the steep recent increases is that even in markets in which there has been asubstantial loss of housing affordability, the seriousness can be masked. For example, the housing
cost increases in Chicago have been characterized as modest, having risen from a Median Multipleof 3.1 in 2000 to 4.6 in 2005, or a 48 percent increase. While this increase was less than In Los
Angeles, New York or Sydney, it represented a steep increase by historical standards. In 1995, a 4.6
Median Multiple would have made Chicago the least affordable market in the United States.

Median Multiple Trend: Australia
LARGEST MARKETS: 1981-2005

98
7

SydneyMedian House
Price/MedianHouseholdÅ Income

6

Adelaide Æ

5Melbourne

4
BrisbanePerth3

Data points on labeled years only

2
1981

1986

1991

1996

2001

2005

Figure 2

Demographia International Housing Affordability Survey: 20068

Median Multiple Trend: Canada
1995-2005

4.5
Median House
Price/MedianHouseholdÅ Income

4.0

Toronto

3.5
National

3.0
2.5
2.0
1995

2000

2005

Figure 3Median Multiple Trend: Ireland & UK
1996-2005

8
7
6

Median House
Price/MedianHouseholdÅ Income

London (GLA)
Dublin

5
4
3
2
1996

2001

2005

Figure 4

Demographia International Housing Affordability Survey: 2006

9

Median Multiple Trend: New Zealand
1991-2005

6
5
4
3

Median House
Price/MedianHouseholdÅ Income

National

Wellington

2
1991

1996

2001

2005

Figure 5Median Multiple Trend: United States
BY MARKET AFFORDABILITY: 1995-2005

8
7
6
5

Severely Unaffordable
Markets (2005)

Median House
Price/MedianHouseholdÅ Income

Data points on labeled years only

4
3

Affordable Markets (2005)

2
1995

2000

2005

Figure 6

Demographia International Housing Affordability Survey: 200610

Housing Market Ratings History: USA
1995 & 2005
Moderately
Unaffordable

60

Severely
Unaffordable

50
40

Number ofÅ Markets

Seriously
Unaffordable
Moderately
Unaffordable

30
20
Affordable

10

Affordable

0
1995

2005
Figure 7

The “Housing Bubble”

M

any analysts and much of the business press have followed the unprecedented housing costprice escalation with seeming glee, while ignoring the reality that household incomes have notbeen inflating at a corresponding rate. This superficial approach is both naïve and irresponsible. Any
number of products might be imagined that might be converted into objects of financial speculation,at the same time as rendering a nation less prosperous. For example, massive and unprecedented
price escalation, from speculation in food products or medical markets might serve the short-term
interest of investors, while imposing broad detrimental effects. There is a public interest in
maintaining house prices within the economic means of most households.
Oddly, the most affordable markets have sometimes been characterized as poor performers. There
are many losers when home prices become decoupled from the underpinning income realities.
Middle income and lower income households find it impossible to afford the higher prices and may
be relegated to renting for many additional years, if not a lifetime. The equity that they would havebuilt up instead goes to the pockets of landlords. Others fortunate enough to afford the higher
prices must settle for more modest houses, which are likely of lower quality. Many of households
will be able to afford their own houses only through financial assistance from their parents, while
those with less affluent parents will remain in rental units. Already there is evidence that the averageage of first homebuyers is rising.10

Demographia International Housing Affordability Survey: 200611

Some analysts have noted that, by mortgage qualification standards, housing affordability is noworse than in the early 1980s. However today’s unaffordability is different. The unaffordability ofthe early 1980s was due to high interest rates. As interest rates declined, households refinanced thedebt on their homes at lower rates, improving affordability. This made the 1980s unaffordablity
inherently temporary, even for those who purchased at the most unfavorable time. 11 Unaffordability,
however, is not temporary for households who purchase homes at the excessively high prices typicalof the highly regulated markets.
By reducing the share of households that can afford to buy homes, high Median Multiples inevitably
lead to greater income disparity. Thus, to think of rising house prices as a good thing while ignoring
the incomes that support them is to miss the point completely. Australian Reserve Bank Governor
Ian MacFarlane emphasized this point in parliamentary testimony with reference to the unaffordable
housing prices in Sydney.12 The reality, of course, is that the more affordable markets are the better
performers by virtue of the higher standard of living that they facilitate for more households.
However, the reality is that declining housing affordability has reached crisis proportions in manymarkets.
Regulatory Roots of the Housing Affordability CrisisT

he rapid increase in housing prices relative to household incomes has been attributed to various
factors.

Macroeconomic Factors: Macroeconomic factors, such as lower interest rates or new, more liberalfinancing instruments are frequently mentioned. There seems little doubt that macroeconomic
factors have played a part in the recent house price escalation across all markets. However, the broad
nature of macroeconomic factors means that they could not have driven some markets into the“uncharted territory” of decoupled prices and incomes, while leaving others virtually unaffected.
Macroeconomics may explain much of the Median Multiple increase observed in affordable markets.
However, much of this movement in the Median Multiples could be attributed to the normal“swing” through the building cycle and as activity moderates, it is likely the Median Multiple will as
well.
As noted above, United States markets rated affordable in 2005 experienced an overall increase of
0.3 Median Multiple points between 1995 and 2005 (from 2.3 to 2.6). Some faster growing markets
had slightly more rapid Median Multiple rises. For example, the Atlanta Median Multiple rose 0.4
points, while the Houston figure rose 0.7 points.

Demographia International Housing Affordability Survey: 2006

12

It seems implausible that macroeconomics can explain materially more of the larger Median Multiple
swings occurred in the most unaffordable markets over the same period. Examples include slower
growing San Diego, where the Median Multiple has risen 7.2 points, and Miami with an increase of
6.4 points or New York at 4.3 points. Nor can macroeconomic factors explain the more than 50
percent Median Multiple escalation (2.3 Median Multiple points, from 4.2 to 6.5) in Adelaide from2001 to 2005 or the increases in a number of other markets.
Low interest rates have been available both in severely unaffordable markets such as Dublin,
Melbourne, Manchester or San Francisco and in affordable markets such as Quebec, Edmonton,
Cincinnati, Columbus or Kansas City.
Indeed, the inordinately escalating housing prices in some markets may be immune to monetaryinterventions by central banks. For example, the Reserve Bank of New Zealand has increased shortterm interest rates to the highest level in the industrialized world, at least partially to restrain risinghouse prices.13 Yet, the interest rate hikes have proven to be impotent with respect to restraining
house prices, which have continued to escalate well ahead of incomes14 (Figure 8). The causes
appear to be beyond the reach of monetary policy. The research below suggests that a principal
cause is market strangulation that has been caused by excessive land use regulation.

Short Term Interest Rates & House Prices
NEW ZEALAND: 2001-2005

8.00%
7.00%

$350,000
Short Term Interest Rate

$300,000

6.00%$250,000

5.00%
4.00%

$200,000Median House Price$150,000

3.00%
2.00%
1.00%

$100,000
Å Short Term
Interest Rate
(OCR)Median House
Price Æ0.00%

$50,000$0

2001.12

2002.122003.122004.122005.12Figure 8

Demographia International Housing Affordability Survey: 200613

Demand: Similarly, differences in demand do not seem to be a factor. The affordable markets
include slow growing areas, such as Buffalo and Winnipeg as well as fast growing areas, such as
Edmonton. Indeed, Atlanta, Dallas-Fort Worth and Houston have remained affordable, despite
having the highest growth rates among the largest markets surveyed. In these markets, demand andsupply are in general balance, despite the fact that demand is exceedingly strong. At the same time,some severely unaffordable markets are also growing, such as Phoenix or Las Vegas. Other severely
unaffordable markets are growing slowly, such as Boston, New York, San Francisco, and London.15
High demand, by itself, does not raise prices. Rather, higher prices occur when demand exceeds
supply --- when there is scarcity.
Supply: New York Times columnist and economist Paul Krugman may have best characterized thesituation when he coined the term “zoned zone” to denote the regions of the United States in which
land use regulation has artificially driven prices up, while prices remain affordable elsewhere.16
Research is increasingly identifying insufficient supply as the main driver of excessive house priceescalation. In particular, the supply has been seriously dampened by government land use regulatory
policies that have the effect of rationing land. This raises the price of land and, in consequence, there
are markedly higher housing prices where such policies have been implemented.
The land restrictions go by the monikers of “smart growth” or “urban consolidation” and they makelarge swaths of land off-limits to housing construction or impose excessive costs17 or costly delays.18
Scarcity is also created by policies not principally intended to regulate, such as government land sales
that lag well behind the underlying demand for new housing development, such as in the Las Vegas
and Phoenix areas.19 Administering agencies gloat about their rising revenues, apparently oblivious
to the longer-term economic and social damage their home ownership reducing policies are creating.
Harvard University published research by Glaeser and Gyourko found that there was little differencein construction costs between US markets and characterized land use controls as playing the“dominant role” in the housing costs differences.20 Stable construction costs have been observed
even where there has been massive house price escalation. In Australia, construction costs (laborand materials) has declined in real terms over the past quarter century.21 A more recent report byGlaeser estimated that Boston area house prices had been inflated 60 percent by scarcity.22 This
“land rationing premium” alone ($156,000) is enough to buy a median priced home in Dallas-Fort
Worth, Houston and 16 of the other 19 affordable markets in the United States. United Kingdom
Deputy Prime Minister John Prescott’s Barker Report cited land regulation as a principal factor in theinordinate housing price increases and associated loss of affordability.23
Moreover, a recent Organization for Economic Cooperation and Development (OECD) report
noted an association between strongly regulated land markets and higher housing prices.24 The
Harvard University Joint Center for Housing Studies State of the Nation’s Housing Report 2005 notesthat “development constraints drive up land and construction costs as well as prevent new housingfrom keeping pace with rising demand.”25 A report by the Royal Institution of Chartered Surveyors(RICS) in the United Kingdom attributed housing supply difficulties to land use regulation in someWestern European nations, as well as the United Kingdom.26

Demographia International Housing Affordability Survey: 2006

14

Rationing Land and Housing Affordability: In fact, the housing markets with the worst housing
affordability (highest Median Multiples) tend to have more stringent land regulation. Highly
regulated markets dominate Australia, Ireland, New Zealand and the United Kingdom. Further,
Vancouver, in Canada is highly regulated, along with a number of markets in the West andNortheast of the United States. Toronto, with its newly enacted land restrictions seems likely toexperience serious housing affordability deterioration in the years to come (Figure 9).27

Median Multiple by Market
CATEGORIZED BY LAND RATIONING POLICY

12
Market Codes: See Figure Sources

10
8
6
4

0

ROC
BUF
IPS
PGH
STL
OKC
KC
DFW
CIN
AUS
LVL
ATL
EDM
SA
HOU
COL
CLV
DET
MEM
CGY
NVL
MON
MSP
NO
CHA
JVL
HFD
PHI
VB
DEN
GGW
MIL
POR
TOR
BAL
CHI
TSP
PHX
MAN
SEA
ORL
BIR
PRV
L-B
DUB
BRS
BOS
PER
WDC
MEL
LV
ADL
AUK
VAN
SAC
LON
NY
SYD
MIA
SF
SD
LA

2

Figure 9

The problem is even becoming evident to urban planners who have initiated the excessive
regulations. A recent report by the Planning Institute of Australia referred to a destructive spiral causedby new planning schemes being made unnecessarily complex, containing too much padding and basically over regulating
development unnecessarily.28 The “destructive spiral” is felt well outside the planning departments of land
use regulating governments. Indeed, affordability losses are felt across the income spectrum, not justamong households for whom the realistic hope of home ownership has been extinguished. The
excessively high prices in highly regulated markets also raise the cost of low-income “affordable
housing.” As land prices are driven higher, the public cost of providing housing assistance to low
income households also increases.
On the other hand, regulation is considerably lighter in other markets. In affordable markets such as
Winnipeg, Edmonton, Atlanta, Dallas-Fort Worth, Houston and a significant number of additional
US markets, development is generally allowed so long as there is compliance with sensible
environmental standards. Moreover, superior affordability is not limited to these North American

Demographia International Housing Affordability Survey: 200615

markets. Generally, urban housing markets have not experienced inordinate cost increases inGermany and Switzerland. In these countries, land use planning agencies have the responsibility toensure that the supply of land is sufficient to avoid scarcity driven house price increases, though
house sizes are significantly smaller than in Australia, Canada, New Zealand and the United States.29
Caution: International House and Lot Size DifferencesAt the same time, caution should be employed in comparing Median Multiples between
countries, due to substantial differences in average house and lot size. The Demographia
International Housing Affordability Survey does not adjust the Median Multiples within its ratings toreflect these differences. The average size of housing, particularly new housing, is abnormally smallin Ireland and the United Kingdom.

For example, according to national reporting agencies, the average new house constructed inAustralia and the United States is approximately 2,200 square feet (over 200 square meters),
including both detached houses and multiple units. New house sizes are nearly as large in New
Zealand (1,900 square feet or 175 square meters), while new detached houses average 1,900 square
feet (175 square meters) in Canada.30 However, new average house sizes are less than one-half thatsize in United Kingdom, (815 square feet or 76 square meters). This is only 15 percent larger thanthe hundreds of thousands of standardized flats built in tower blocks before 1990 by the East
German government (700 square feet or 65 square meters).31 Irish new house sizes are, like their UK
counterparts, also comparatively small, at 945 square feet (88 square meters). Moreover, new UK
houses are the smallest in the former EU-15, while new Irish houses rank ninth in size among the 15
nations (Figure 10).32
Houses in Australia, Canada, New Zealand and the United States have increased substantially in sizein recent decades.33 In just the last 20 years, the average new detached house in Australia and New
Zealand has increased by two-thirds the total size of a house in United Kingdom.34 New house sizes
have dropped more than 30 percent in the United Kingdom since 1920.35 Ireland’s smallish houses
are built perplexingly small as the nation emerges as one of the most affluent in world, leading all
European Union members except smaller Luxembourg.
There appears to be a general unawareness of these differences, at least in the United Kingdom. For
example, Richard (Lord) Rogers, who chaired the UK Government Urban Task Force has written:
The British are extravagant with land. We insist on building as if we lived in the American Midwest or theAustralian outback. The US builds on average 40 dwellings for every hectare … in Britain, we erect 23 newbuildings for every hectare ...36
In fact, average house lots are much larger in the United States (and Australia, Canada and New
Zealand) than in the United Kingdom. In the United States, new detached houses are built at 2.7 peracre (6.6 per hectare). In Australia, new detached houses are being built at 5.5 per acre (13.3 perhectare).37 By comparison, in the United Kingdom, new houses were built at an average of 16 peracre (40 per hectare) in 2005.38 Future lot sizes are likely to be even smaller in Dublin, where present
zoning calls for 20 houses per acre (49 per hectare), which would require five (5) more houses to be

Demographia International Housing Affordability Survey: 200616

crowded onto an acre than just four years ago (13 more houses per hectare).39 Seven Dublin houses
or six United Kingdom houses could be built on the average new house lot in the United States or
three to four compared to Australia.40

Average New House Size by Nation
SINGLE & MULTIPLE UNITS

2,250

200

2,000

175

1,750
1,500

SquareMetersÆ

Square
ÅFeet

150
125

1,250
1,000

100

750

75

500

50

250

25

0

0
Australia

USA

NZ

IrelandUK

Figure 10

Indicating a similar misunderstanding, The Sunday Times of London wrote that an objective of an
Essex County plan was:…to persuade builders to provide big family apartments on the continental model, rather than large numbersof small detached houses.41
In fact, much of recently built housing stock in many continental (Western Europe) markets is
detached. For example, single family houses comprise two-thirds of new house construction in
France.42 The United Kingdom has some of the most tightly packed suburbs43 in the high-income
world, at densities nearly double that of Western Europe and 60 percent greater than in Japan.44
Value for Money: New houses, adjusted for size differences, are more than twice as costly relative
to incomes in Ireland and the United Kingdom as in Australia and New Zealand. Moreover, newhouses in the UK and Ireland are approximately five to six times as costly, adjusted for size
differences, as in affordable markets such as Indianapolis or Winnipeg. Figure 11 illustrates the scaleof differences in housing affordability that would be evident if the Median Multiple were adjusted
for house size.

Demographia International Housing Affordability Survey: 200617

House Size Adjusted Median Multiple
SURVEY NATIONS

16
14
12

MedianMultiple
Adjusted
For New
House
ÅSize

10
8
6
4
2
0
Indianapolis

Winnipeg

Australia

NZ

IrelandUK

Figure 11

Housing Affordability: The Policy ImperativeIn summary, the unprecedented housing affordability crisis could represent a threat to prosperous
economies. Research indicates that the crisis may be, in large part, a consequence (negative
externality) of the excessive land use regulation that has been adopted in many markets. Severe land
use regulations have generally been adopted without any understanding of their ultimate impacts on
housing affordability. Indeed, these effects have often not been considered at all. Where housing
affordability concerns have been raised, the typical response has been denial rather than informed
and objective analysis.
Nonetheless, a considerable body of evidence indicates that the housing affordability crisis is not
result of natural market force. The principal cause seems to be excessive land use regulation thatstrangles housing markets and drives prices upward at rates far higher than can be attributed toeconomic trends. Economics teaches that scarcity tends to raise prices, a principle that applies tovirtually all products and services, including houses and land.
The loss of affordability is so immense that policies such as affordability quotas, first home buyer
grants, workforce housing or tax relief programs cannot possibly make a material difference, despite
their rhetorical attractiveness in some circles.
The implications go far beyond the nations covered in the second Annual Demographia International
Housing Affordability Survey. For example, the emerging economies of Eastern Europe and Asia have

Demographia International Housing Affordability Survey: 200618

the potential to speed their growth by policies that encourage household wealth creation throughhome ownership. In Eastern Europe, this could, in turn, improve longer economic term prospects
by encouraging more young people to remain at home, rather than moving to the now richer
Western Europe. There are early indications that some Eastern European nations are following thismore promising path.45
Housing markets where prices have risen far out of line with incomes are likely to suffer declining
home ownership rates (as is happening in unaffordable New Zealand), with material economic andeven social46 difficulties. Public authorities in these markets should seek to resolve this problem byemulating the international best practices that have preserved housing affordability in many
Canadian and US markets, and even in Germany and Switzerland.
Economist Raven Saks of the US Federal Reserve Board has published research indicating thepotential for economic loss in excessively regulated markets. 47 The Joint Center for Housing Studies
of Harvard University summarized the research as showing that metropolitan areas:… with stringent development regulations generate less employment growth than expected given theirindustrial bases.48

Demographia International Housing Affordability Survey: 2006

19

SCHEDULE 1

Housing Affordability Ratings
Using Median Multiple (Median House Price/Median Household Income)2005 - 3rd Quarter
Unaffordability
Rank

NationSEVERELY UNAFFORDABLE
1United States
2
United States
3
United States
4
United States
5
United States
6
United States
7
Australia
8
United States
9
United States
10
United States
11
United Kingdom
12
United Kingdom
12
United States
12
United States
15
New Zealand
15
Australia
15
Canada18
Australia
19
United States
19
Australia
21
United States
21
United States
23
United States
23
United Kingdom
23
Australia
26
Australia
26
Ireland26
United Kingdom
29
New Zealand30
United States
31
United Kingdom
32
United States
32
United Kingdom
34
United States
34
United Kingdom
36
United Kingdom
36
United Kingdom
36
United States
39
United Kingdom
39
United Kingdom
39
New Zealand42
United States

MarketMedianMultiple

Los Angeles & Orange County, CA
San Diego, CA
Honolulu, HI
Ventura County, CA (Los Angeles Area)
San Francisco, CA
Miami-West Palm Beach, FL
SydneyNew York, NY-NJ-CT-PA
Riverside-San Bernardino, CA (Los Angeles Area)
San Jose, CA (San Francisco Area)
London (Greater London Authority)
Bristol
Fresno, CA
Sacramento, CA
AucklandHobartVancouver
Adelaide
Las Vegas, NV
Melbourne
Bridgeport, CT (New York Area)
Washington, DC-VA-MD-WV
Boston, MA-NH
East of England (London Area)
Perth
Brisbane
DublinSoutheast England (London Area)
Christchurch
Tucson, AZ
Tyne & Wear (Newcastle)
Providence, RI-MA
West Yorkshire (Leeds-Bradford)
Orlando, FL
West Midlands (Birmingham)
Greater Manchester
Merseyside (Liverpool)
Seattle-Tacoma, WA
Nottinghamshire
South Yorkshire (Sheffield)
Wellington
Phoenix, AZ

11.2
10.8
10.6
9.6
9.3
8.8
8.5
7.9
7.7
7.4
6.9
6.8
6.8
6.8
6.6
6.6
6.6
6.5
6.4
6.4
6.3
6.3
6.1
6.1
6.1
6.0
6.0
6.0
5.9
5.7
5.6
5.5
5.5
5.4
5.4
5.3
5.3
5.3
5.2
5.2
5.2
5.1

Demographia International Housing Affordability Survey: 200620

Unaffordability
Rank

NationMarketMedianMultiple

SERIOUSLY UNAFFORDABLE
43
United States
44
United States
45
Australia
45
United States
47
United States
48
United States
48
United States
50
Canada51
Australia
52
United States
52
United States

Tampa-St. Petersburg, FL
Chicago, IL
Canberra
New Haven (New York Area)
Baltimore, MD
Allentown, PA-NJ
Worcester (Boston Area)
TorontoDarwinMilwaukee, WI
Portland, OR-WA

5.0
4.9
4.8
4.8
4.7
4.6
4.6
4.4
4.3
4.2
4.2

MODERATELY UNAFFORDABLE
54
United States
54
United Kingdom
54
United States
57
United States
57
United States
57
United States
60
Canada61
United States
61
United States
63
United States
63
United States
63
United States
66
United States
66
United States
66
Canada69
United States
69
United States
71
Canada71
United States
73
United States
73
Canada73
United States
73
United States

Denver, CO
Strathclyde (Glasgow)
Virginia Beach-Norfolk, VA-NC
Hartford, CT
Philadelphia, PA-NJ-DE-MD
Richmond, VA
Hamilton
Albuquerque, NM
Jacksonville, FL
Birmingham, AL
Charlotte, NC-SC
New Orleans, LA
Albany, NY
Minneapolis-St. Paul, MN-WI
Montreal
Baton Rouge, LA
Nashville, TN
Calgary
Memphis, TN-AR-MS
Detroit, MI
Ottawa, ON
Raleigh, NC
Salt Lake City, UT

4.0
4.0
4.0
3.9
3.9
3.9
3.8
3.7
3.7
3.6
3.6
3.6
3.5
3.5
3.5
3.3
3.3
3.2
3.2
3.1
3.1
3.1
3.1

Demographia International Housing Affordability Survey: 200621

Unaffordability
Rank
AFFORDABLE
77
78
78
78
81
81
81
81
81
81
81
88
88
88
91
91
91
94
94
94
97
97
99
99

NationUnited States
United States
United States
United States
United States
United States
United States
United States
CanadaUnited States
CanadaUnited States
United States
United States
United States
United States
United States
United States
United States
United States
United States
CanadaUnited States
United States

MarketCleveland, OH
Columbus, OH
Houston, TX
San Antonio, TX
Atlanta, GA
Austin, TX
Cincinnati, OH-KY-IN
Dallas-Fort Worth, TX
Edmonton
Louisville, KY-IN
QuebecDayton, OH
Kansas City, MO-KS
Oklahoma City, OK
Grand Rapids, MI
St. Louis, MO-IL
Tulsa OK
Akron, OH
Omaha, NE-IA
Pittsburgh, PA
Indianapolis, IN
Winnipeg
Buffalo, NY
Rochester, NY

Demographia International Housing Affordability Survey: 2006

MedianMultiple

3.0
2.9
2.9
2.9
2.8
2.8
2.8
2.8
2.8
2.8
2.8
2.7
2.7
2.7
2.6
2.6
2.6
2.5
2.5
2.5
2.4
2.4
2.2
2.2

22

SCHEDULE 2

Housing Affordability by Nation
Using Median Multiple (Median House Price/Median Household Income)2005 - 3rd Quarter
MedianMultiple

MarketAffordability Rating

MedianHouse PriceMedianHouseholdIncomeAUSTRALIA
Adelaide
Brisbane
Canberra
DarwinHobartMelbourne
PerthSydneyAverage of Markets

6.5
6.0
4.8
4.3
6.6
6.4
6.1
8.5
6.2

Severely Unaffordable
Severely Unaffordable
Seriously Unaffordable
Seriously Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable$272,000$310,000$350,000$300,000$266,500$360,000$308,000$520,000$41,700$52,000$72,600$69,400$40,100$56,000$50,200$61,000

CANADA
Calgary
Edmonton
Hamilton
Montreal
Ottawa, ON
QuebecTorontoVancouver
Winnipeg
Average of Markets

3.2
2.8
3.8
3.5
3.1
2.8
4.4
6.6
2.4
3.6

Moderately Unaffordable
Affordable
Moderately Unaffordable
Moderately Unaffordable
Moderately Unaffordable
Affordable
Seriously Unaffordable
Severely Unaffordable
Affordable$219,000$164,900$224,900$169,400$214,900$135,300$290,400$373,000$118,000$67,900$59,600$59,000$48,400$69,600$48,100$66,500$56,500$49,400

IRELAND
Dublin

6.0

Severely Unaffordable€304,700€51,000

NEW ZEALAND
AucklandWellington
Christchurch
Average of Markets

6.6
5.2
5.9
5.9

Severely Unaffordable
Severely Unaffordable
Severely Unaffordable$383,300$296,500$275,000$57,800$57,400$46,500

Demographia International Housing Affordability Survey: 200623

MedianMultiple

MarketAffordability Rating

MedianHouse PriceMedianHouseholdIncomeUNITED KINGDOMBristol
East of England (London Area)
Greater Manchester
London (Greater London Authority)
Merseyside (Liverpool)
Nottinghamshire
South Yorkshire (Sheffield)
Southeast (London Area)
Strathclyde (Glasgow)
Tyne & Wear (Newcastle)
West Midlands (Birmingham)West Yorkshire (Leeds-Bradford)
Average of Markets

6.8
6.1
5.3
6.9
5.3
5.2
5.2
6.0
4.0
5.6
5.4
5.5
5.5

Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Moderately Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable£166,800£171,000£117,000£235,000£117,000£127,000£109,500£195,000£89,400£115,000£125,000£120,000£24,600£28,000£22,200£34,100£21,900£24,300£21,100£32,300£22,400£20,700£23,100£21,800

UNITED STATESAkron, OH
Albany, NY
Albuquerque, NM
Allentown, PA-NJ
Atlanta, GA
Austin, TX
Baltimore.MD
Baton Rouge, LA
Birmingham, AL
Boston, MA-NH
Bridgeport, CT (New York Area)
Buffalo, NY
Charlotte, NC-SC
Chicago, IL
Cincinnati, OH-KY-IN
Cleveland, OH
Columbus, OH
Dallas-Fort Worth, TX
Dayton, OH
Denver, CO
Detroit, MI
Fresno, CA
Grand Rapids, MI
Hartford, CT
Honolulu, HI
Houston, TX
Indianapolis, IN
Jacksonville, FL
Kansas City, MO-KS
Las Vegas, NV
Los Angeles & Orange County, CA

2.5
3.5
3.7
4.6
2.8
2.8
4.7
3.3
3.6
6.1
6.3
2.2
3.6
4.9
2.8
3.0
2.9
2.8
2.7
4.0
3.1
6.8
2.6
3.9
10.6
2.9
2.4
3.7
2.7
6.4
11.2

Affordable
Moderately Unaffordable
Moderately Unaffordable
Seriously Unaffordable
Affordable
Affordable
Seriously Unaffordable
Moderately Unaffordable
Moderately Unaffordable
Severely Unaffordable
Severely Unaffordable
Affordable
Moderately Unaffordable
Seriously Unaffordable
Affordable
Affordable
Affordable
Affordable
Affordable
Moderately Unaffordable
Moderately Unaffordable
Severely Unaffordable
Affordable
Moderately Unaffordable
Severely Unaffordable
Affordable
Affordable
Moderately Unaffordable
Affordable
Severely Unaffordable
Severely Unaffordable$129,100$192,800$170,800$242,700$171,200$167,100$282,100$156,300$158,400$430,900$476,900$103,700$189,800$274,700$148,700$147,000$156,600$147,200$123,600$253,500$172,100$290,000$140,700$259,500$615,000$145,100$128,900$187,000$159,000$313,000$553,200$51,900$55,200$46,000$52,900$60,900$59,500$59,500$46,900$44,400$70,700$76,300$47,900$52,300$56,500$52,800$48,200$53,300$53,400$46,600$62,600$55,100$42,800$53,200$66,000$58,200$50,400$53,200$50,300$58,300$49,100$49,500

Demographia International Housing Affordability Survey: 2006

24

UNITED STATES (Continued)
Louisville, KY-IN
Memphis, TN-AR-MS
Miami-West Palm Beach, FL
Milwaukee, WI
Minneapolis-St. Paul, MN-WI
Nashville, TN
New Haven, CT (New York Area)
New Orleans, LA
New York, NY-NJ,-CT-PA
Oklahoma City, OK
Omaha, NE-IA
Orlando, FL
Philadelphia, PA-NJ-DE-MD
Phoenix, AZ
Pittsburgh, PA
Portland, OR-WA
Providence, RI-MA
Raleigh, NC
Richmond, VA
Riverside-San Bernardino, CA (Los Angeles Area)
Rochester, NY
Sacramento, CA
Salt Lake City, UT
San Antonio, TX
San Diego, CA
San Francisco, CA
San Jose, CA
Seattle-Tacoma, WA
St. Louis, MO-IL
Tampa-St. Petersburg, FL
Tucson, AZ
Tulsa OK
Ventura County, CA (Los Angeles Area)
Virginia Beach-Norfolk, VA-NC
Washington, DC-VA-MD-WV
Worcester, MA-CT (Boston Area)
Average of Markets

2.8
3.2
8.8
4.2
3.5
3.3
4.8
3.6
7.9
2.7
2.5
5.4
3.9
5.1
2.5
4.2
5.5
3.1
3.9
7.7
2.2
6.8
3.1
2.9
10.8
9.3
7.4
5.3
2.6
5.0
5.7
2.6
9.6
4.0
6.3
4.6
4.6

Affordable
Moderately Unaffordable
Severely Unaffordable
Seriously Unaffordable
Moderately Unaffordable
Moderately Unaffordable
Seriously Unaffordable
Moderately Unaffordable
Severely Unaffordable
Affordable
Affordable
Severely Unaffordable
Moderately Unaffordable
Severely Unaffordable
Affordable
Seriously Unaffordable
Severely Unaffordable
Moderately Unaffordable
Moderately Unaffordable
Severely Unaffordable
Affordable
Severely Unaffordable
Moderately Unaffordable
Affordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Severely Unaffordable
Affordable
Seriously Unaffordable
Severely Unaffordable
Affordable
Severely Unaffordable
Moderately Unaffordable
Severely Unaffordable
Seriously Unaffordable$137,700$145,500$386,600$219,700$233,000$164,300$291,900$162,100$461,100$121,000$138,000$261,300$230,600$268,000$122,600$253,700$305,100$175,300$214,500$387,300$120,000$388,900$181,400$137,600$615,000$721,900$705,000$325,000$148,000$213,500$242,300$123,100$678,400$208,600$441,400$296,600$49,100$45,100$43,900$52,200$65,700$50,200$60,400$44,600$58,400$44,700$54,800$48,000$58,800$52,300$48,600$61,000$55,400$57,300$55,100$50,000$54,300$57,600$59,300$48,100$56,800$78,000$94,900$60,900$56,300$42,800$42,500$47,700$70,700$52,300$70,400$64,500

Financial information in national currency at current prices

Demographia International Housing Affordability Survey: 2006

25

METHODSMedian house price information is obtained from national reporting agencies. Median householdincome data is generally estimated using a national statistics bureau generated based adjusted to a2005 estimate by the best available indicator of median income growth. More reliable data sources,
adjustment factors and geographical definitions have been used where identified. In the UnitedStates, a re-estimation of annual data by the Department of Housing and Urban Development since
the last Survey makes comparison of US income data non-comparable with the previous edition.
Because of data variations and alternative estimation methods, caution should be employed in
making definitive comparisons between markets with similar Median Multiples. The most relevant
comparisons are between categories of unaffordability.
The following data sources were principally relied upon:
AMP Banking (Australia)
Australian Bureau of Statistics
California Association of Realtors
Canada Mortgage and Housing Corporation
Canadian Home Builders Association
Canadian Real Estate Association
Central Statistics Office Ireland
Central Valley Association of Realtors (United States)
Chambre Immobilière de Québec
Department of the Environment, Heritage and Local Government (Ireland)
Florida Association of Realtors
Fresno Association of Realtors (United States)
Housing Industry Association (Australia)
National Association of Home Builders (USA)National Association of Realtors (USA)National Statistics (United Kingdom)
Office of the Deputy Prime Minister (United Kingdom)
Permanent TSB (Ireland)
Real Estate Board of Edmonton
Real Estate Board of Winnipeg
Real Estate Institute of Australia
Real Estate Institute of New Zealand
Reserve Bank of Australia
Royal Bank of Canada
Royal LePage Real Estate Services (Canada)
Statistics Canada
Statistics New ZealandUnited States Department of Commerce: Bureau of Economic Administration
United States Department of Commerce: Bureau of the Census
United States Department of Housing and Urban Development

Demographia International Housing Affordability Survey: 2006

26

The table below describes the housing markets included in the Survey.
Markets Included in the
Demographia International Housing Affordability Survey
NationAustralia
CanadaIreland
New ZealandUnited Kingdom
United States

Markets Included
Markets corresponding to capital city statistical areas
Markets corresponding to all metropolitan areas over 500,000
Dublin Region (former Dublin County)
Markets corresponding to all metropolitan areas over 300,000
Markets corresponding to all metropolitan areas over 500,000
Markets corresponding to all metropolitan areas (MSAs) over 700,000

Illustrations: New Houses (Left to Right):
Suburban Indianapolis, United States
Suburban Montréal, Canada
East of England (Exurban London), United Kingdom
Suburban Dublin, Ireland
Suburban Christchurch, New Zealand
Suburban Adelaide, Australia

Comments and enquiries are welcome.

Wendell Cox Consultancy (Demographia)
P.O. Box 841
Belleville, Illinois 62269 USA(St. Louis Metropolitan Region)www.demographia.com
wcox@demographia.com+1.618.632.8507
Contact: Wendell Cox

Pavletich Properties Limited
PO Box 13 439
Christchurch, New Zealandhugh.pavletich@xtra.co.nz+64.3.343.9944
Contact: Hugh Pavletich

Demographia International Housing Affordability Survey: 200627

AUTHORS
Wendell Cox
Wendell Cox is principal of Wendell Cox Consultancy (Demographia), an international public policy
consulting firm. He also serves as a visiting professor at the Conservatoire National des Arts etMetiers in Paris (a national university). He is also associated with various public policy organizations,such as the Heritage Foundation (Washington), the Heartland Institute (Chicago), the Cato Institute(Washington), Frontier Centre (Winnipeg), Texas Public Policy Foundation, Independence Institute(Denver), Institut économique de Montréal, National Center for Policy Analysis (Dallas), Reason
Public Policy Institute (Los Angeles), Georgia Public Policy Foundation, Virginia Institute for Public
Policy and Maryland Public Policy Institute. Wendell Cox has completed projects in the UnitedStates, Western Europe, Canada, Australia and New Zealand in urban policy, demographics andtransport. He was appointed to three terms on the Los Angeles County Transportation Commission
by Mayor Tom Bradley and to the Amtrak Reform Council by Speaker of the U. S. House ofRepresentatives Newt Gingrich. Wendell Cox Consultancy sponsors three internet web sites(www.demographia.com, www.rentalcartours.net, www.publicpurpose.com), one of which has beenhonored as one of the nation’s top internet transport sites by the National Journal(www.publicpurpose.com):
Hugh Pavletich
Hugh Pavletich is the Managing Director of Pavletich Properties Ltd, a commercial property
development and investment company, based at Christchurch, South Island, New Zealand. He
commenced his working life as a farm worker and wool classer (wool classifier) in 1967 and moved
to Christchurch in 1980 where he started developing small factory units and has developed
commercial and industrial property on freehold and Maori leasehold land in other centers of theSouth Island as well. His industry involvement commenced when elected President of the South
Island Division of the Property Council of New Zealand (then the Building Owners & Managers
Association – BOMA) soon after its inception in 1991, which he led for four years. He has had
extensive involvement with public policy issues of local authority financial management, land use
regulation and heritage. In 2004, he was elected a fellow of the Urban Development Institute ofAustralia (UDIA) for services to the industry. During that year, he felt there was a need for aninternational measure of housing affordability and teamed up with Wendell Cox, to develop theannual Demographia International Housing Affordability Survey.

Demographia International Housing Affordability Survey: 200628

SOURCES FOR FIGURES
1. Schedule 2
2. Estimated from Australian Bureau of Statistics and Real Estate Institute of New Zealand data.
3. Estimated from Statistics Canada data.
4. Estimated from Central Statistics Office (Ireland), Department of the Environment, Heritage and Local Government(Ireland), National Statistics (UK) and Office of the Deputy Prime Minister (UK) data
5. Estimated from Statistics New Zealand and Real Estate Institute of New Zealand data.
6. Estimated from US Bureau of the Census National Association of Realtors and National Association of Home
Builders data.
7. Data from Figure 6.
8. Data from New Zealand Reserve Bank and Real Estate Institute of New Zealand.
9. Schedule 1, using primary markets over 1,000,000 (excluding markets in larger metropolitan areas, such as VenturaCounty in the Los Angeles area). Market codes shown in the table below.
CodeMarketCode

MarketCode

MarketADL

Adelaide

HFD

Hartford

ORL

Orlando

ATL

Atlanta

HOU

Houston

PER

Perth

AUK

Auckland

IPS

Indianapolis

PGH

Pittsburgh

AUS

AustinJVL

Jacksonville

PHI

Philadelphia

BAL

BaltimoreKC

Kansas City

PHX

Phoenix

BIR

Birmingham

L-B

Leeds-Bradford

POR

PortlandBOS

BostonLA

Los Angeles-Orange Co.

PRV

Providence

BRS

Brisbane

LON

LondonROC

Rochester

BUF

Buffalo

LV

Las VegasSA

San Antonio

CGY

Calgary

LVLLouisville

SAC

Sacramento

CHA

Charlotte

MAN

ManchesterSD

San Diego

CHI

Chicago, IL

MEL

Melbourne

SEA

SeattleCIN

Cincinnati

MEM

MemphisSF

San Francisco

CLV

Cleveland

MIA

Miami

STL

St. Louis

COL

Columbus

MIL

Milwaukee

SYD

SydneyDEN

DenverMON

Montreal

TOR

Toronto

DET

Detroit

MSP

Minneapolis-St. PaulTSP

Tampa-St. Petersburg

DFW

Dallas-Fort WorthNONew Orleans

VAN

Vancouver

DUB

DublinNVL

Nashville

VB

Virginia Beach

EDM

EdmontonNY

New York

WDC

Washington

GGW

Glasgow

OKC

Oklahoma City

10. Data from Australian Bureau of Statistics, US Bureau of the Census, Infometrics Consulting Ltd. (NZ) and European
Housing Statistics 2002.
11. House size adjustment using a Median Multiple of 2.4 (Indianapolis) and the average new US house size.

Demographia International Housing Affordability Survey: 2006

29

ENDNOTES
1 “Median” should not be confused with “average.” A “median” is the midpoint of a statistical distribution, whereas theaverage is the sum of the values divided by the number of values. An “average” is less reliable for analyzing housing
affordability because it is skewed upward by the highest housing prices and therefore yields a number that is notreflective of what the average household could expect to afford in an undistorted (unstrangled) market.
2 Housing markets are based upon definitions used by national, regional and local reporters of existing home prices. In
some cases, they correspond to metropolitan areas or urban areas, but in other cases, they do not.
3 States are shown for US markets in Schedules 1 and 2 because many markets are located in more than one state.
Similarly, the province (Ontario) is shown for Ottawa, since the market does not include the Quebec portion of the
Ottawa-Gatineau metropolitan area.
4 Figure sources are cited at the end of this article.
5 There has been a slight improvement in some Australian markets in the last year, however it would be inappropriate toconsider it more than token. For example, the Median Multiple in Sydney declined from 8.8 to 8.5. The latter figure is far
higher than at any except for the recent period of unprecedented escalation and housing affordability remains far below
any level than can be considered healthy.
6 Housing New Zealand, Local Measures of the Ability of Working Households to Become Home Owners in New Zealand (2005)
http://www.hnzc.co.nz/housingresearch/housing%20affordability%20-%20final%20report.pdf.
7 For example, minority (such as Hispanic and African-American) home ownership rates are a full one-third below
white-non-Hispanic homes ownership rates in the United States. Various programs have sought to raise homeownership rates, especially among minorities. The most recent is the President’s Home Ownership Initiative, announced byPresident Bush in 2004. See http://www.whitehouse.gov/news/releases/2004/03/20040326-5.html.
8 Demographia, Major Market Housing Affordability: United States: 1995-2005 (2005).
http://www.demographia.com/db-haff19952005us.htm.
9 Among the 64 markets for which data is available for both years.
10 For example, this is illustrated by the declining home ownership share of household reference persons (heads ofhouseholds) under 35 years old in Australia. In the decade ending in 1988, the home ownership share in this age category
dropped from 47 percent to 39 percent. This reduction occurred during a period of rising house prices relative toincomes (Median Multiple), but before the much stronger Median Multiple increases that were to follow from 2001 to
2005. See: “2000 Housing Special Article: First Home Buyers,” Year Book Australia,
http://http://www.abs.gov.au/Ausstats/abs@.nsf/Lookup/26D3CE89DDFEBC4ECA2569DE0024577E.
11 For example, in the United States, 78 percent of the existing mortgage portfolio had interest rates of 8.0 percent orabove in 1991. By 2003, only 15 percent of mortgages had interest rates that high (data from United States Bureau of the
Census, American Housing Survey).
12 Official Committee Hansard, House of Representatives, Standing Committee on Economics, Finance and Public
Administration, 12 August 2005, http://www.aph.gov.au/hansard/reps/commttee/R8516.pdf
13 Sundeep Tucker (Financial Times) “Rising Interest Rates Crimp New Zealand's Reputation,” Los Angeles Times (26December 2005).
14 From 2003 to 2005, while the Reserve Bank increased the short-term interest rate nine times, the median house pricein New Zealand rose at approximately the same rate as in the previous two years, when short-term interest rates werereduced.
15 US Census data indicates that in severely unaffordable metropolitan areas with more than 2.5 million population in
2000, there has been a net loss of 1.8 million “internal migrants” (people moving to an area from another area within the
United States) between 2000 and 2004. Among affordable metropolitan areas in the same size classification, there has
been a net gain of nearly 200,000. See: Demographia, US Census Domestic Migration Data Reveals Heavy Core Losses (2005);
http://www.demographia.com/db-metmigra20002004.pdf. A particularly graphic example is the Portland (Oregon)area, where more than 98 percent of domestic migrants have moved to portions of the metropolitan area that are outside
the urban growth boundary (Demographia, Portland Urban Growth Boundary Keeps Out Growth, 2005;
http://www.demographia.com/db-porugbmigr.pdf.
16 Paul Krugman, “About that Hissing Sound in the Zoned Zone,” The New York Times, 8 August 2005.
17 Excessive infrastructure impact fees are discussed in Patrick N. Troy, The Perils of Urban Consolidation, Annandale,
NSW, Australia: The Federation Press, 1996 and Wendell Cox and Joshua Utt (2004), The Costs of Sprawl Reconsidered:

Demographia International Housing Affordability Survey: 200630

What Does the Actual Data Show? Washington, DC: Heritage Foundation(http://www.heritage.org/Research/SmartGrowth/bg1770.cfm).
18 Examples of such policies include urban growth boundaries, restraints on government land sales and releases, building
moratoria, excessive development impact or infrastructure fees, excessive delays in project approvals, and minimum
density requirements (large lot zoning).
19 In Las Vegas and Phoenix, governments seem to be seeking to maximize their financial return by sales at well below
the rate of demand. No indication was found to indicate that the housing affordability consequences have been seriously
considered.
20 Edward L. Glaeser and Joseph Gyourko (2002). The Impact of Zoning on Housing Affordability, Cambridge, MA: Harvard
Institute of Economic Research.
21 lan W. Evans and Oliver Mark Hartwich, Bigger, Better, Faster, More: Why Some Countries Plan Better than Others, Policy
Exchange (2005), http://www.policyexchange.org.uk/uploads/media/Bigger_Better_Faster_More_-_final.pdf. .
22 Edward L. Glaeser, Jenny Schuetz, and Bryce Ward, Regulation and the Rise of Housing Prices in Greater Boston, Pioneer
Institute for Public Policy Research and Rappaport Institute for Greater Boston, Kennedey School of Government,
Harvard University (2005).
http://www.ksg.harvard.edu/rappaport/downloads/housing_regulations/regulation_housingprices.pdf.
23 Kate Barker (2004). Review of Housing Supply: Delivering Stability: Securing Our Future Housing Needs: Final Report—
Recommendations. Norwich, England: Her Majesty’s Stationery Office.
http://www.hm-treasury.gov.uk/consultations_and_legislation/barker/consult_barker_index.cfm.
24 “Recent House Price Developments: The Role of Fundamentals,” OECD Economic Outlook #78 (2005),
http://www.oecd.org/dataoecd/41/56/35756053.pdf.
25 State of the Nation’s Housing Report 2005, Harvard University Joint Center for Housing (2005),
http://www.jchs.harvard.edu/publications/markets/son2004.pdf.
26 Michael Ball, RICS European Housing Review 2005, Royal Institution of Chartered Surveyors, (2005),
http://www.rics.org/NR/rdonlyres/FE69252B-B62E-47BD-820E-471AA2072C65/0/ehr_2005_full_report.pdf.
27 See: Wendell Cox, Myths About Urban Growth and the Toronto Greenbelt, Fraser Institute (2004),
http://www.fraserinstitute.ca/admin/books/files/UrbanGrowth&TorontoGreenbelt.pdf.
28 Planning Institute of Australia, Findings and Recommendations of the National Inquiry into Planning Education and Employment,
http://www.planning.org.au/index.php?option=com_docman&task=docclick&Itemid=62&bid=232&limitstart=0&lim
it=10, (p. 29). The report went on characterize the process to express concern that governments are having difficulty
obtaining sufficient staff to administer these planning requirements.
29 Alan W. Evans and Oliver Mark Hartwich, Bigger, Better, Faster, More: Why Some Countries Plan Better than Others, Policy
Exchange (2005), http://www.policyexchange.org.uk/uploads/media/Bigger_Better_Faster_More_-_final.pdf.
30 U.S. Census Bureau, Australian Bureau of Statistics and Canadian Home Builders Association and Infometrics
Consulting, Ltd (NZ), (http://www.infometrics.co.nz/top10/art1719.htm. The latter source indicates that from 1985 to
2003, the average size of all new houses increased more than 50 square meters in Australia and New Zealand, comparedto the total average new house size of 76 square meters in the United Kingdom.
31 Christine Hanneman, Architecture as Ideology, Humboldt Universitat zu Berlin (1995),
www2.hu-berlin.de/stadtsoz/mitin/ch/slab_of_gdr_eng.pdf cited in Randal O’Toole, Smart Growth and the Ideal City
(2005), http://www.ti.org/vaupdate53.html. According to the Royal Institution of Surveyors, in East Germany “arounda million” tower block apartments have been abandoned by residents reunification re-unification of Germany (MichaelBall, RICS European Housing Review 2005, Royal Institution of Chartered Surveyors, (2005),
http://www.rics.org/NR/rdonlyres/FE69252B-B62E-47BD-820E-471AA2072C65/0/ehr_2005_full_report.pdf, p.
17).
32 Department of Housing of the Direction General of Planning, Housing and Heritage, Walloon Region of Belgium,
Housing Statistics in the European Union 2002,
http://www.international.vrom.nl/Docs/internationaal/housingStats2002.pdf.
33 For an account of US housing sizes from 1950 to 2000, see Barbara T. Alexander, The U.S. Homebuilding Industry: A
Half-Century of Building the American Dream, John T. Dunlop Lecture, Harvard University (2000).
http://http://www.jchs.harvard.edu/publications/markets/balexander_M00-1.pdf.
34 Calculated from U.S. Census Bureau, Australian Bureau of Statistics and Canadian Home Builders Association, andInfometrics Consulting, Ltd (NZ) data.
35 Focus DIY, Houses Get that Shrinking Feeling (2003), http://www.focusdiy.co.uk/stry/corporate20031015.

Demographia International Housing Affordability Survey: 2006

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36 Richard (Lord) Rogers, “Save Our Cities,” The Observer, 13 February 2000,
http://www.geog.le.ac.uk/ajs/gy342/rogers.htm.
37 United States data from Bureau of the Census http://www.census.gov/const/C25Ann/medavgsoldlotsize_cust.xls).
Australia data from Australian Bureau of Statistics(http://www.abs.gov.au/ausstats/abs@.nsf/0/15cdfb6cdb264658ca256f02007967be?OpenDocument). The average lot
or block size for both nations excludes multiple units. However, most new housing in both nations is single rather thanmultiple unit. Data on space requirements was not found for multiple units. However, at the US construction mix, only
3.2 houses per acre (8 houses per hectare) --- single family and multiple unit --- would be constructed even if no land
were added to account for the multiple units.
38 Office of the Deputy Prime Minister.
39 Department of the Environment, Heritage and Local Government (Ireland), Housing Statistics, 24 November 2005.
40
The smaller space allocations for new houses in Ireland and the UK do not appear to be justified by a shortage ofdevelopable land. In Ireland, approximately 4 percent of land is covered by urban development, while 8 percent isdeveloped in England and Wales (approximately 6 percent in Great Britain). This compares to 12 percent in France and28 percent in the Netherlands. Urban development the New World countries covers less land, from approximately 0.3
percent in Australia to 2.6 percent in the United States. Smaller urban areas generally take up considerably more space inproportion to their populations than the larger urban centers (see http://www.demographia.com/db-intlualand.htm).
41 Hugh Pearlman, “The Greening of 10 MPH Suburbia, The Sunday Times, (November 20, 2005),
http://www.timesonline.co.uk/article/0,,2087-1879922,00.html
42 Michael Ball, RICS European Housing Review 2005, Royal Institution of Chartered Surveyors, (2005),
http://www.rics.org/NR/rdonlyres/FE69252B-B62E-47BD-820E-471AA2072C65/0/ehr_2005_full_report.pdf
43 Nearly all urban population growth in Western Europe, Japan, Australia, Canada, New Zealand and the United Stateshas been suburban for decades (Demographia, High-Income World Metropolitan Areas: Core City and Suburban Population
Trends, http://www.demographia.com/db-highmetro.htm).
44 Demographia, Suburban, Core & Urban Densities by Area: Western Europe, Japan, United States,
Canada, Australia & New Zealand (2005) http://www.demographia.com/db-intlsub.htm.
45
http://www.rics.org/NR/rdonlyres/FE69252B-B62E-47BD-820E-471AA2072C65/0/ehr_2005_full_report.pdf.
46 For example, see Benjamin M. Friedman, The Moral Consequences of Economic Growth, New York: Alfred A. Knofp, 2005.
47 Raven E. Saks, Job Creation and Housing Construction: Constraints on Employment and Growth in Metropolitan Areas, Harvard
University Joint Center for Housing (2004), http://www.jchs.harvard.edu/publications/markets/w04-10_saks.pdf.
48 State of the Nation’s Housing Report 2005, Harvard University Joint Center for Housing (2005). p. 6.,
http://www.jchs.harvard.edu/publications/markets/son2004.pdf.

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